Dry bulk vessel heard fixed to move containers from Europe to China

Star Bulk could likely be the first Capesize shipowner to move containers on their bulk vessel, market sources said Aug. 24.

Star Bulk was heard to have fixed a Capesize ship for moving containers from Europe to China: 200 loaded TEUs charged at $20,000/TEU and 1,200 empty TEUs at $3,000/TEU. Star Bulk could not be reached for a comment.

Dry bulk market participants estimated that the freight equivalent on the key Brazil to China iron ore route for a standard Capesize ships basis this kind of container load was around $43/wmt.

The freight rate for a Capesize ship, the main iron ore carrier, to move 170,000 mt (plus/minus 10%) iron ore cargo from Tubarao to Qingdao was assessed Aug. 24 at $36.50/wmt, the highest since $37.50/mt assessed on May 14, 2010.

The S&P Global Cape T4 index, a weighted average index of the most liquid Capesize routes, reached $50,713/day on Aug. 23, basis vessels burning 0.5% sulfur marine fuel, the highest since its launch on Nov. 1, 2019.

While using bulk carriers to load containers was not new, a shipowner source said that it was the first time to hear Capesize loading containers. This was an indication of how much higher container rates are, especially when Capesize rates are at a decade high, the source added.

"Technically, it is possible for a Capesize ship to load containers," said a second shipowner. "The vessel would need some adjustments to load and transport containers safely," a shipbroker said.

The second shipowner noted that a key point was around cargo insurance cover.

"Would the owners' insurance and P&L cover a Capesize vessels designed for bulk commodities to carry containers? If not, it is going to be an expensive [for the owner] if anything goes wrong," said a ship brokering source.

Owners reluctant

While returns from moving containers could be better as compared to traditional bulk cargoes, most owners expressed their reservations on going about doing the same.

This comes as the container market continues to see significant tightness, with delays at ports now common across much of Europe and North Asia, driving prices higher and resulting in significant headaches for shippers around the world.

"People are resorting to whatever solutions they can to try and move goods at the moment," said a UK-based freight forwarder. "There are almost no loaded containers being taken on backhaul routes, so I'm not surprised someone has tried to be inventive with the solutions and are loading boxes onto a bulker, let's see if the prices work out for them."

Platts Container Rate 2 – North Continent-to-North Asia – was assessed at $1,750/FEU on Aug. 23, significantly below the levels expected for this vessel.

"If someone needs to move cargo, they need to move cargo," the freight forwarder continued. "We've seen VRIs [Voluntary Rate Increases] with shippers outbidding one another already for space, so this is just the absolute extreme example of that situation."

This news comes on the back of a somewhat bleak picture for shippers, who were paying significant amounts to ship cargo on the prompt headhaul routes. In recent weeks there was some downside seen on the backhaul routes from Europe to Asia as the build-up of containers continued in European ports, leaving supply of empties significantly outstripping demand.

Container rates have had a very volatile year-to-date, with delays from logistical issues, such as the grounding of the Ever Given in March, or the COVID outbreak in Yantian in May dominating the scene and tying up containers, resulting in a lack of equipment and soaring global freight rates.

This has been further exacerbated by delays in returning empty containers to ports once they have been unloaded and taken inland, owing to the lower staffing levels at warehouses around the world. This has left fewer empty containers in circulation, and thus left demand far outstripping supply in the first half of the year, leaving rates at over eleven-times the levels they were seen at a year earlier.

PCR1 – North Asia-to-North Continent – was assessed at $17,000/FEU on Au. 23, up from $1,525/FEU a year earlier.